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Free Guide to Start an LLC in Illinois

Starting a business in Illinois can be an exciting time. Before selling your product or service though, the nuts and bolts of licenses, registrations, and taxes must be completed.

The guide below will show you the DIY process of forming an LLC in Illinois. However, you can also use an online LLC service handle the paperwork for you. We reviewed and ranked the 7 best available.

 

The Top 2 Worth Considering:

  • Northwest Registered Agent is a great option if you are looking for premium customer support.
  • IncFile is ideal if you are looking for the best pricing with excellent features.

 

Step 1: Name Your LLC

Selecting a name for your Illinois LLC is a first step, yet a very important one. A name that is unique and easy to remember is helpful in finding potential clients or retaining customers.

The name should indicate the product or service. It should also follow guidelines set forth by the state of Illinois.

The name of an LLC will likely appear on business cards and stationary, marketing materials, a website, legal contracts, business bank accounts, invoices and/or a building directory.

Illinois law requires that the business name includes the words “Limited Liability Company,” “LLC,” or “L.L.C.” It cannot include the words or abbreviations “Corporation,” “Corp.,” “Incorporated,” “Inc.,” “Ltd.,” “Co.,” “Limited Partnership,” or “L.P.”

It must be different than other names already registered. Below are additional guidelines:

  • The name cannot contain the word “bank,” “banker,” or “banking.”
  • It cannot contain a connotation that is offensive.
  • It must include only letters of the English alphabet and Arabic or Roman numerals.
  • It cannot contain a word or phrase that implies that it was formed for the purpose of insurance, assurance, banking, or as a corporate fiduciary.

For Example

Let’s imagine that someone is considering opening a flower shop in Rockford, Illinois. The name she is considering, Flowers by Fanny, is already in use. Instead, she decides to legally name her business Fanny’s Florals and Design, LLC.

Determine the Name is Available

Following the selection of a name but before filing the Articles of Organization, check to ensure that your name is unique on the Name Search Database of the Illinois Office of the Secretary of State website. Searching in other places, such as online, is also a good idea. You also may email your name availability request or call (217)524-8008. An expedited processing fees will be  charged.

After you have determined that your chosen name is “distinguishable,” the name can be registered in order that you have exclusive rights for 90 days.

Optional: Name Reservation

Sometimes a situation may arise where an individual wants a particular name but needs time to organize his/her company before filing paperwork to create an LLC. In this case, a name can be reserved for 90 days in the state of Illinois.

The downside is that it does cost $25 for the reservation. An Application to Reserve a Name can be filed either by mail or in person. Processing time will take 10 to 15 business days after receipt of the application.

Mail or deliver to the following address:

Secretary of State Department of Business Services

Limited Liability Division

501 S. Second St., Rm. 351

Springfield, IL 62756

 

Step 2: Choose a Registered Agent

Every LLC in Illinois is required to have a registered agent. This agent can be an individual or a company.

The role of the registered agent is that of a contact person between the LLC and the state. As stated on the Office of the Illinois Secretary of State website, the registered agent “is designated by the company as having authority to accept service of process, and will also act as the conduit for the exchange of information between the company and the Secretary of State’s office.”

Simply put, the process agent receives communications or documents from the state involving such things as taxes or lawsuits and communicates them to the LLC.

Some may wonder why an Illinois registered agent is necessary. The importance of the agent is to ensure that someone is always available to receive important documents even if the business owner leaves the office, goes on vacation, or is otherwise away. Also, having a registered agent is especially important if a physical office does not exist in Illinois.

The organizer of the LLC should designate a registered agent on the Articles of Organization application.

Individual as Registered Agent

Most importantly, the individual must be a resident of the state of Illinois. An organizer, member, or manager of the LLC may act as the registered agent.

Still, using a third party ensures that nothing falls through the cracks. The third party can be an accountant, an attorney, or even a friend. The agent must have a physical and mailing address in Illinois.

Registered Agent Service

If using a service, the registered agent must be a business or professional. We recommend either using an LLC formation service (like Incfile or Northwest Registered Agent) which gives you a free registered agent or ordering a registered agent service by yourself if you choose to DIY your Alaska LLC formation.

 

Step 3: File the Formation Documents with State

Let’s assume that fictional Fanny has selected both the name for her LLC and the registered agent. She is ready to complete the paperwork (called the Articles of Organization) that actually creates Fanny’s Florals and Design, LLC in Illinois.

This step can be completed online, by mailing a hard copy through USPS, or in person. The filing cost is $150. Expedited processing is available for an additional $100 when filing online or in person. When you are ready, it is important to note a few details about each method to ensure that your application is fully completed in the time frame in which you need it.

Online Filing

Filing online includes automatic expediting. Therefore, an additional $100 fee will be automatically added to the $150 regular filing fee. Processing will take 24 hours, excluding holidays and weekends.

Mail

The original completed application plus one copy need to be included with a certified check, cashier’s check, money order, or check from an Illinois attorney or accountant. The check is payable to the Secretary of State. Expedited processing is not available when filing through the mail. Standard processing time is between 10 and 15 business days.

Application materials can be sent to the following address:

Secretary of State

Department of Business Services Limited Liability Division

501 S. Second St., Rm. 351

Springfield, IL 62756

In Person

The application can be delivered in person to either the address listed above or to the Chicago address below:

Illinois Secretary of State

Division of Business Services

69 W. Washington St., Suite 1240

Chicago, IL 60602

Expedited processing is available for an additional $100 and will be completed within 24 hours of receipt in either the Springfield or Chicago office.

 

Step 4: Create an Operating Agreement

An operating agreement in the state of Illinois is recommended though not required. The agreement is a contract that defines the operations of the LLC, includes terms and conditions, states the responsibilities of its members, and ensures legal protections of its members.

All owners of the LLC must be in agreement of the terms in the agreement and sign before a notary public.

The operating agreement is useful for both multi-member and single-owner LLCs. In both cases, the agreement provides protections.

For example, in the case of the multi-owner LLC, the terms can stipulate what should happen if a death or divorce occurs among one of its members. In the case of the single-owner LLC, the agreement could be used in court as evidence that the LLC is separate from the individual owner.

The operating agreement can be created in two ways. Some individuals may choose to write the agreement on their own, using an online template. In this case, forms are available that are specific to state. Be sure to use the correct multi-member or single-member form.

The alternative is hiring an attorney to create the document. The benefits of using an attorney are ensuring the document doesn’t exclude any important information, adheres to state law, and invalidates default provisions that may not be what you wish.

 

Step 5: Get an EIN

An EIN is an Employer Identification Number. Anyone who runs their business as a corporation or partnership must file for this 9-digit number in order to identify the tax accounts of a business. The number can be applied for in one of the following three ways:

Online

Applying online is the quickest method. The process can be completed between 7 a.m. and 10 p.m. EST, Monday through Friday. When the form is completed, the information will be immediately validated and a number issued while you are still online. In order to apply online, a valid individual taxpayer number, such as a Social Security number, is required.

Fax

Form SS-4 can be downloaded, completed and faxed to 855-641-6935, twenty-four hours, seven days per week. The EIN will be provided within four business days.

Mail

If either of the above methods are unavailable, Form SS-4 can be mailed, though processing will take approximately four weeks. The form can be mailed to the following address:

Internal Revenue Service Operation

Attn: EIN Operation

Cincinnati, OH 45999

Think you’re ready to open up shop now? Guess again!

 

Step 6: Taxes, Licensing & Income Reporting

Businesses like Fanny’s Florals and Design, LLC may be official after completing the above steps, but it is important not to overlook a few critical details.

Taxes

On the federal level, most LLCs do not pay taxes directly to the government. Instead, they report income and losses on the owner’s personal 1040 tax returns. Schedule C is often used for reporting. Unless the LLC chooses to be taxed as a corporation, a single-member LLC is taxed as a Sole Proprietorship and a multi-member LLC is taxed as a Partnership.

Similarly, most LLCs will pay state tax on pass-through income via their personal income tax returns. The exception is if an election is made to tax the LLC as a corporation.

Some LLCs may be required to pay a personal property replacement tax of 1.5% of net income. If the LLC is regarded as a partnership or corporation for federal tax purposes, the tax will be required. If the LLC is regarded as a sole proprietorship for federal tax purposes, the tax will not be required.

If operating a resale business, the LLC will need a retailer’s occupation tax number. If operating a wholesale business, the LLC will need a Resale Certificate Number. For more information, visit the Illinois Department of Revenue Business Division.

If the LLC is an employer, an unemployment insurance tax will be required. An Unemployment Compensation Number will need to be obtained through the Illinois Department of Labor. You will also need to withhold and pay a payroll  tax.

Finally, an LLC may need to file and pay a local tax to a city, municipality, or county.

Licensing

Every LLC must register with the Illinois Department of Revenue before conducting business. This can be done using one of the following three methods:

Online

Registration can be completed online and will take between one and two business days to process.

Mail

The hard copy application can be sent to the following address:

Central Registration Division

Illinois Department of Revenue

P.O. Box 19030

Springfield, IL  62794-9030

Processing will take between six and eight weeks.

In Person

Visit a regional office.

Following processing, the certificate of registration and taxpayer ID number will be sent in the mail.

A professional license may also be required. Professional licenses are issued through the Illinois Department of Financial and Professional Regulation. Requirements and fees vary according to the license.

Reporting

An annual report must be filed with the state of Illinois by the first day of the “anniversary month,” or the month in which the LLC was formed. The filing fee is $75 with the option for expedited processing, an additional $50.

Six weeks prior to the due date, a copy of the annual report form will be mailed to the LLC via the registered agent. If the report is not filed by the due date, the LLC will be given delinquent status, restricting the LLC from obtaining a certificate of good standing or the ability to file any other documents.

If the report is not filed within 60 days after the due date, the LLC will be placed in penalty status and charged a $100 fee. If the report is still not filed within another 120 days, the LLC will be dissolved by the state.

The annual report can be filed online and will be processed immediately. If filing by mail or in person, the processing time is between ten and fifteen business days. The processing can be expedited (24 hours) for an additional $50. If mailing, use one of the following address:

Secretary of State Department of Business Services

Limited Liability Division

501 S. Second St., Rm. 351

Springfield, IL 62756

 

Illinois Secretary of State

Division of Business Services

69 W. Washington St., Suite 1240

Chicago, IL 60602

When all of the mechanics of setting up an LLC in Illinois have been completed, someone like Fanny can get down to the business of setting up a website, creating a logo…or purchasing flowers!

 

Need Help Creating Your LLC?

We recommend LLC formation services because it allows you to knock off an important thing off your checklist so you can focus all your energy on actually starting a business.

Can you do it yourself? Absolutely.

However, a service that forms an LLC for you will help with ongoing maintenance and keep you notified of any requirements you should adhere to.

As we mentioned earlier, IncFile and Northwest Registered Agent are the top LLC services available. If you’re not familiar with them, as a point-of-reference many of our readers like to compare them to the most well known LLC service, LegalZoom.

IncFile vs LegalZoom or Northwest Registered Agent vs LegalZoom